Brazil's Collor Faces Charges Of Corruption, Calls to Resign

AS investigations of alleged corruption by family and friends of President Fernando Collor de Mello get ever closer to the leader himself, the scandal threatens the future of Brazil's emerging democracy.

Parallel probes by Congress, the federal police, and the internal revenue service into influence peddling charges against Mr. Collor's campaign treasurer have led many Brazilians to call for impeachment or an improvised parliamentary system of government.

"It's sad that the country should have to go through this," says Maria Salete Puglia, a bakery owner, as she pauses on her way down a Sao Paulo street. "Collor should resign. It will be very bad, but things are already very bad." Early warning

Collor denied on national television June 21 that he had received a warning early on in his term about the alleged influence peddling of his friend and campaign treasurer, Paulo Cesar Farais.

Collor didn't say if he thinks Mr. Farais is guilty, but he did state that his own "personal action has always been ruled by the strictest fairness, by the strictest adhesion to ethical principles," In a meeting with top news media executives June 22, Collor said he will "complete [his] term to the last day."

The president went this latest round while a congressional investigative committee delves ever deeper into the corruption scandal touched off in May by Collor's younger brother Pedro. Economic fallout

The Farias story is shaking Brazil's financial markets and delaying long-awaited progress on the economic policy front. The Rio de Janeiro and Sao Paulo stock market indices both fell more than 4 percent June 22, following accumulated plunges of over 10 percent the week before.

"The country cannot become a prisoner of denunciations. The denunciations cannot become a court sentence," complained Economy Minister Marcilio Marques Moreira to the Gazeta Mercantil newspaper.

Brazil is expected to close a debt agreement with private foreign banks by the end of June, and Mr. Moreira says he plans to "maintain calm, economic and financial stability, institutional stability, and redouble fiscal efforts," despite the Farias scandal.

Last month many Brazilians feared the effect a presidential shake-up could have on the country, which returned to a civilian government in 1985 after 21 years of military dictatorship. But worry about the danger to democracy now may be giving way to impatience with the status quo.

"I hope those responsible are punished.... What [Collor] did is dangerous enough, corrupting the nation," says Andre Marina, a sales director.

The scandal's growing impact has even led one Brasilia travel agency to create a city tour whose guides point out sites of alleged wrongdoing during Collor's term, which began in March 1990 and ends in 1995.

Part of the six-minute television speech Collor delivered June 21 came in response to this week's revelations in Veja, Brazil's top news magazine. Over the last three weeks, Veja has published interviews with Collor's brother and two former members of the Collor government.

"Anyone who thinks that Collor didn't know, is fooling himself," says Renen Calheiros, a former congressman and early Collor supporter. "Anyone who says this isn't true is lying. By way of cynicism or ingenuousness, [Paulo Cesar Farias] is an extension of the president."

Mr. Calheiros says he warned the president in the fall of 1990 that Farias was diverting Health Ministry funds to finance the gubernatorial campaign of Calheiros's opponent in Alagoas, the home state of both Farias and Collor. Calheiros eventually broke with the president, and lost that election.

In his speech, Collor did not refer by name to Veja, Farias, or Calheiros, but spoke of a "weekly magazine" and "the rancor of a defeated person."

Last Tuesday, a Sao Paulo businessman told the congressional committee that officials linked to Farias at the Health Ministry had demanded kickbacks in exchange for awarding supply contracts to his company, a sanitation equipment manufacturer.

In the June 14 Veja, Luiz Octavio Motta da Veiga, former president of state oil monopoly Petrobras, said Farias had often pressured him to soften the sale terms of Vasp, the Sao Paulo state airline, to benefit the buyer. Political impact

The Brazilian president appears to be hoping that he will remain untouched, even if Farias goes to jail. Some analysts say that such an outcome is in the interest of many politicians, as they rally against the deep economic changes Collor has promised to make, and also as they eye various upcoming elections.

"The leadership's main interest is to keep Collor weak and hostage to their interests," says Walder de Goes, a University of Brasilia political science professor. The politicians need someone to blame for Brazil's problems.